Positive Gearing

A positively geared property means that the rent
received from your investment property is greater then the costs of owing it,
including interest rate repayments and maintenance expenses. However, property
experts note that positive gearing could be tricky because it relies on the
rents being high in comparison to the purchase price of the property.

Cheap properties paying high rents tend to be thin
on the ground. Payment of a large deposit on the property is usually required to
push it into the positive zone.

To generate a positive cash flow, investment costs must be lower or equivalent
to the income received from the property, taking into account your rental yields
combined with tax breaks. If construction of an investment property commenced
after 19 July 1985 you are entitled to depreciation allowances that will enable
you to claim “paper losses” to reduce your taxable income.

The benefit of a property that generates a cash flow is realized when you sell
the investment property some time in the future. This is because you won’t have
to subtract the losses incurred over the life of the investment, as is the case
with negatively geared properties. For detailed information on this issue you
should seek the advice of a financial planer with expertise in investment
property or a qualified accountant.

In the final analysis, property experts point out that prospective investors
should always apply the fundamental rule of buying the right property in the
right location at the right price. With capital growth as the ultimate goal
these three elements are vital.
Apartments for sale Melbourne - property investment opportunity.

Why do some property investments work better than
others for their owners .... and what can I do to make sure my property
investments do perform?